The publication market continues to face more than its share of challenges, from declining page counts

to higher costs, all of which is impacting ink manufacturers.

“Domestic publication ink market/volume has seen a decrease in ’08 due to reduced page counts at the printers,” said Kevin McNally, national account manager for INX International Ink Co. “Globally, the Asia markets continue to see growth as these countries are still experiencing economic growth, however still not as strong as previous year.”

“The past year has proved to be most challenging for the publication heatset printing and ink market,” said Greg Lawson, vice president, sales for Sun Chemical. “The soft demand for publication print and escalating raw material costs have been the primary concerns in the industry. Heatset ink raw material costs have risen in excess of 20 percent.”

“With regard to sheetfed heatset and web offset heatset inks, global shipment volumes for the Toyo Ink Group, though rising, have reached a point where it is becoming difficult to secure profits,” said Aviv Haruta, general manager of corporate communications, Toyo Ink Mfg. Co., Ltd. “This is chiefly due to the soaring costs of raw materials arising from oil price hikes.”

“Volume appears to be a little softer across the board,” said Doug Anderson, Central Ink Corporation’s vice president of operations. “When paper and postage prices go up, volume typically goes down. In some cases, printers use lower basis weight papers, and the challenge is to make the printing look better at a lower cost.”

In terms of individual segments, Mr. McNally said that magazines are softer while catalogs have fared better.

“Over the years, I would say the magazine segment has not fared well due to poor margins and reduced volumes,” Mr. McNally said. “The catalog segment continues to remain level with volume, but also struggles with stiff price competition.”

New press technologies are driving ink companies to emphasize R&D.

“The publication ink market has seen demand for printing on higher speed presses,” said Joerg-O Seeger, Hostmann-Steinberg USA’s president. “Larger format and higher speed presses are being added in an attempt to neutralize the increase in cost of raw materials. Paper changes along with higher productivity needs require different ink design parameters.”

“The principal driving forces behind innovation in the publication marketplace are the quests for greater productivity and flexibility, as well as enhanced environmental acceptability,” Mr. Lawson added. “The same digital revolution that presents competitive challenges to traditional printing technologies has also enabled significant advances in offset and gravure.”

Consolidation is also affecting the printing and ink industries, notably led by R.R. Donnelley.

“In 2007 and early 2008, the heatset industry witnessed a lot of consolidation among printers,” Mr. McNally said.

“Shrinking print demand and escalating costs continue to drive consolidation,” Mr. Lawson said. “The current merger of Vertis and American Color Graphics is an example of this continuing consolidation.”

“Consolidation among printers isn’t helping,” Mr. Anderson said. “I’d prefer to see business spread out among more companies rather than fewer.”

Higher Costs

The impact of higher raw material, operational and transportation costs have forced ink manufacturers to issue their own price increases to try to recapture some of their higher costs. For example, microcrystalline waxes, a key ingredient for heatset inks, has been heavily impacted by higher petroleum costs, as have pigments, solvents, oils, resins and other key additives. Outside of price increases, there has also been supply issues throughout the publication ink market, notably napthenic oils for news inks, which are now being mandated for use by the tire industry.

“It has probably been the most volatile market for raw material prices and availability I have ever seen, and there’s a tightening of raw materials,” said Mr. Anderson. “There’s a lot of suppliers who aren’t around anymore.”

“As our business continues to get hit from all sides from the surging cost of raw materials, including the rising naphtha prices, we’ve had to pass on a portion of the increased cost to customers,” Mr. Haruta said. “Price adjustments, however, have not completely offset these higher costs.”

“Higher raw material and operational costs in 2008 has impacted our industry probably to the magnitude never seen before,” Mr. McNally said. “It really was the ‘Perfect Storm.’ We still continue to work diligently with our customers to pass along the needed increases. The heatset market still remains very price driven and often makes capturing increases a difficult process.”

“Raw material prices increased early this year, and we were able to do some things internally to minimize their impact on our customers,” Mr. Gilliam said. “We did issue a fuel surcharge to recoup our costs.”

Mr. Lawson said that despite the extreme rising costs of raw materials, Sun Chemical is striving to control costs by working closely with its supply chain partners and by improving internal operations to minimize the impact of this trend.

“These efforts have helped offset some rising raw material costs. However, the increases seen in many areas have outpaced our ability to offset them,” Mr. Lawson said. “These increases in the many oils, resins and other hydrocarbon related raw materials we use, as well as in the transportation costs of everything we buy or sell are being driven by many factors – most notably the continuing tight supply/demand balance for oil, as well as the weakening dollar, and the attractiveness of commodity markets as alternative investments.

“Pigments and intermediates markets in China continue to generate significant cost pressures for ink manufacturers because of critical raw material shortages as well as environmental constraints on manufacturing,” Mr. Lawson added. “As a result, we have had to pass some of these costs on in the way of price increases to our customers. Since we expect no relief in the higher costs of raw materials, it is likely that more price increases may be needed in the future. We will continue to invest in those areas that provide our customers with innovative products and services, allowing them to be more competitive and present the best value propositions in the market.”

News Ink Market

The U.S. newspaper market is facing its own set of challenges, as circulation continues to decline.

“There are major challenges in the news market,” said Todd Wheeler, marketing manager, US Ink. “Even as crude oil prices have come off recent highs, we continue to see raw material prices increase. In particular, we are facing historically high naphthenic oil prices with upside volatility due to new demand from the tire industry. In addition, news ink consumption necessarily correlates with newsprint consumption. Total U.S. newsprint consumption has decreased 33.9 percent from 2000 to 2007. For the period of July 2008 YTD versus July 2007 YTD, U.S. newsprint consumption is down 11.2 percent.”

For Impression Inks, the news ink industry has been very good. “We are enjoying tremendous growth again this year,” said Jeff Gilliam, Impression Inks’ vice president of sales.

Mr. Haruta noted that in Japan, the dailies continue to reduce their number of pages due to digitization of news and the sluggish economy, among other factors.

While U.S. newspapers are gaining advertising on the digital side, that does not make up for its losses in print.

“The state of the newspaper industry in North America is in transition,” Mr. Wheeler noted. “It has been well publicized that the newspaper industry continues to face declines in circulation and advertising. Newspaper executives will have to strike a balance between print and digital. Currently, on average, 92 percent of newspaper revenue comes from print and only 8 percent from digital. However, in trying to find the optimal revenue mix for the future, newspapers must be careful. Trading print dollars for web dimes is a delicate operation and has the risk of undermining their valuable brand and content.”

Publication Gravure

The North American publication gravure faces many of the same problems as the heatset and news segments.

“In North America, publication gravure is a mature market,” said Liz Scherer, director, publication gravure technology for Sun Chemical. “It is challenged by the same issues as the rest of the publication printing market, namely increasing raw material prices, the decline in newspaper circulation and competition from different means of advertising such as the Internet. Offset printing is also vying for a larger piece of the publication print business. The wider, faster offset presses are now doing what traditionally had been gravure length print runs.”

“Future trends in North America may include more short run publication gravure, which has been the norm in Europe for some time,” Ms. Scherer said. “Due to the growing demand of printers’ customers for sustainable products, Sun Chemical also foresees there will be an increasing need for green ink technologies long-term. Our commitment to innovation and sustainability is the driving force behind many of the inks and solutions we offer today, and are working on for the future."

New Technologies

drupa 2008 offered a good look at new press technologies and what the future may bring to the printing industry.

“The big themes at drupa this year were environmental sustainability and print–on-demand inkjet technology,” said Mr. Haruta. “I believe these themes left quite a mark on the future of the printing industry.

New press technologies are leading to new demands for ink manufacturers, as Sun Chemical and hubergroup, the parent company of Hostmann-Steinberg, showcased new technologies at drupa 2008.

“The principal driving forces behind innovation in the publication marketplace are the quests for greater productivity and flexibility, as well as enhanced environmental acceptability,” Mr. Lawson said. “The same digital revolution that presents competitive challenges to traditional printing technologies has also enabled significant advances in offset and gravure.”

Heatset presses are also being designed with wider web widths and higher maximum speeds. These features place increased demands on the performance of lithographic inks and fountain solutions. For example, Sun Chemical has worked with press manufacturers to design both inks and fountain solutions with the ability to print consistently at speeds in excess of 17 meters/second and reduce the misting often associated with high rates of roller revolution.

Mr. Lawson aid that another long-term trend in the publication market is the move toward lower basis weight papers. In heatset printing, the combination of lightweight paper structure and exposure to intense drying conditions can lead to undesirable print defects such as fluting. Sun Chemical is collaborating with a global forest products group to develop an ink and paper combination, which will eliminate the problem.

On the news ink side, Mr. Lawson noted that US Ink recently announced a new advertising technology, “flavor ads,” which will allow the advertiser’s brand to rise above the clutter and put the wow back into print and increase advertisers spending in print. In the same fashion as the dissolving breath strips, US Ink is offering edible films enclosed in a non-resealable pouch that taste and smell like an advertiser’s product. The film can be used on a sticky note, insert or polybag advertisement.

Mr. Seeger noted that hubergroup has taken a lead role in meeting these demands with new product lines such as its !NKredible Revolution heatset web offset inks and !NKredible Good News coldset web offset inks.